“Buy Back” Agreements in Chapter 7 Bankruptcy Cases
If you own a car outright and want to keep that car when you file for Chapter 7 Bankruptcy, entering into a “buy back” agreement with the Chapter 7 Trustee appointed to your case can help you do just that.
In Florida, every Debtor is allowed to claim exemptions against assets (like a car that is owned outright) to protect those assets from being taken from the Debtor when he or she files for bankruptcy. In the above video I use the example of a car worth $10,000 that a hypothetical Debtor may own and want to keep. To maximize the exemptions available to you, in Florida at least, it helps if you do not receive the benefit of Florida’s homestead exemption. So, if you are renting or if you choose to surrender your house through the bankruptcy and therefore do not received the benefit of the Homestead exemption, you will be allowed to claim a $4,000 Wildcard Exemption.
Every Debtor is allowed a $1,000 vehicle exemption. Couple that with the $4,000 Wildcard Exemption, and you’ve just protected $5,000 of the $10,000 car in our example. The remaining $5,000 is what you “buy back” from the Trustee. Most Trustees will allow a Debtor up to a year to pay the Estate the $5,000 by accepting monthly payments from the Debtor at no interest. By entering into the agreement, the Trustee avoids expenses associated with selling the car.
So, you can keep a $10,000 car and file a Chapter 7 Bankruptcy by entering into a buy back agreement with your Chapter 7 Trustee.
